Trade Payables Definition
A trade payable is a debt that a company owes to its suppliers for goods or services that it has received. The amount of the debt is typically based on the invoice from the supplier, which includes the cost of the goods or services plus any additional charges such as shipping and handling. Trade payables are recorded as liabilities on a company’s balance sheet.
Companies often have to pay interest on their trade payables if they do not pay them off within the agreed-upon time frame. This can be costly and negatively impact profitability and cash flow. To avoid this, companies should try to negotiate longer payment terms with their suppliers or offer early payment discounts. Many companies also offer their suppliers financing through factoring or supply chain financing arrangements.
